[Click eStock] "Youngone Corporation's Operating Profit Expected to Decrease This Year... Target Price Down"

Daishin Securities on the 28th lowered the target price for Youngone Trading, an apparel original equipment manufacturer (OEM), to 72,000 KRW, stating that "this year's performance has been revised downward." The buy rating was maintained.

On the same day, Yu Jeong-hyun, a researcher at Daishin Securities, said, "Although the OEM division's sales in the fourth quarter of last year were significantly weaker than expected, the situation in the first half of this year seems to be somewhat improving," but added, "Considering that the performance in the first half of last year exceeded the industry average, order recovery is expected to appear in the second half."

Youngone Trading's sales and operating profit in the fourth quarter of last year were 757.4 billion KRW and 81.5 billion KRW, respectively. These figures represent decreases of 27% and 58% compared to the same period last year, significantly underperforming both internal estimates and market expectations.

Researcher Yu stated, "The OEM division's operating profit margin is estimated to have fallen to around 18% due to the decline in sales," and added, "The sales of its subsidiary, the bicycle company Scott, also decreased by 33% compared to the previous year." Scott experienced significant profit declines throughout the first to third quarters of last year due to discount sales, and its operating profit in the fourth quarter is understood to have remained around 3 billion KRW. Scott, which saw a substantial performance improvement during the 2021?2022 COVID-19 pandemic period due to a surge in bicycle demand, has returned to its past average performance level, resulting in a significant profit decrease.

Researcher Yu predicted, "Due to the decline in sales in the core apparel manufacturing segment, margin contraction is expected in the first half of this year. The increase in minimum wages in Bangladesh will also act as a cost burden," and forecasted, "With Scott returning to an operating profit margin in the 5% range, the company's total annual operating profit this year is expected to decrease by 7% compared to last year." He added, "While there is undervaluation appeal, the stock price will rebound starting in the second half when profit growth becomes more apparent."